Green Business Models in the Nordic region

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1Green Business Models in the Nordic region15th October 2010Markus BjerreProject manager, FORA

2Green Paper: Green Business Models in the Nordic regionInitiative by Danish chairmanship of the Nordic Council of Ministers 2010 as part of the “Green Valley of Europe”-visionFirst initial investigation on green business models in the Nordic regionResults summarised in a Green Paper to be presented on the next meeting of the Nordic Council of Ministers the 25th October 2010Indsæt præsentationens titel via sidehoved og sidefod

3There is an untapped potential!Main conclusions of the Green PaperGreen business models has the potential ofsolid business cases and jobs on a growing marketsignificant lower environmental impactscatalyst for innovationcompany branding (both suppliers and customers)increase motivation amongst workers, and thereby attracting and sustaining the brightest mindsan international stronghold in the Nordic regionKnowledge gap about the benefits and real costs among customers, suppliers, finance institutions, and public authoritiesIndsæt præsentationens titel via sidehoved og sidefod

4First initial investigation on Nordic green business modelsMethodologyInitial desk research and qualifying discussions with relevant actorsIdentification of the most prevalent green business models in the Nordic region.Identification and interviews of 25 case companies and 5 experts on economic and environmental benefits, barriers and drivers and their recommendations for a further dessimination.Workshop : Discussion and qualification from 50 Nordic and international representatives from companies, industry organisations, experts and authoritiesIndsæt præsentationens titel via sidehoved og sidefod

7Functional salesA generic model with common caracteristics for all green business models.The provider offers the customer to pay for the functionality /result of the product instead of buying the product itself.Case: Volvo Aero in Sweden produces airplane engines. Customers buy the power of the engines (‘power by the hour’) instead of buying the engine itself. Volvo has incentives to optimize and maintain the engines to ensure life-cycle cost effectiveness and thereby reduce the environmental impact (less fuel consumption).Indsæt præsentationens titel via sidehoved og sidefod

8ESCO - Energy Saving COmpaniesThe most widely disseminated green business model in the Nordic region.The provider energy optimizes companies and public buildings and in return gets paid by part of the savings achieved. The customer has no up front payment.Case: Danfoss Solutions in Denmark guarantees energy savings for industrial companies and is paid according to performance. The customers are compensated if savings are less than guaranteed.Indsæt præsentationens titel via sidehoved og sidefod

9CMS – Chemical Management SystemsA green business model in the chemical services industryThe provider supply and manage chemicals and related services for the customer through a strategic, long-term contract . The provider is typically remunerated in some form of the customers output. This gives the provider the incentives to reduce the input products.Case: AGA Gas in Sweden reduces their customers’ chemical procurement costs by reducing their use of chemical products and getting better procurement deals from their suppliers.Indsæt præsentationens titel via sidehoved og sidefod

10DBFO - Design, Build, Finance and OperateA green business model typically desseminated in the construction industryThe provider is involved by long term contract (typically years) in the construction, maintenance and operation phase of the project like a building or a road . This gives the provider the incentives to improvethe quality of the construction project so that the life-cycle costs are lowered.Case: Allfarveg AS in Norway has engaged in a 27 years contract to design, build, finance, operate and maintain the 38 km long road E39 Lyngdal-Flekkefjord for the Norwegian Public Roads Administration (NPRA).Performance payment gives Allfarveg the incentives to innovate e.g. they have used brighter stones in the road asphalt, as it leads to less need for light intensity to light up the road, and a 30 pct. saving in the electricity costs.Indsæt præsentationens titel via sidehoved og sidefod

11SharingThe basic idea is that instead of private ownership, the product is shared among a number of users whenever the individual users need access to the product. The economic benefits of this model are less evident than in the other business models, but the sharing of products may pave the way for new products to the market.Case: Move About in Norway provides car-sharing incl. insurance, reservation portal, washing and cleaning and a mobility service package for a fixed monthly price. The electric cars are exempted from parking fees and congestion charges and the cars are entitled to use bus lanes.Corporate customers see the economic advantages and the environmental branding value of sharing the cars.Indsæt præsentationens titel via sidehoved og sidefod

12How do we close the knowledge gap?Companies and experts recommends…Increase awarenessSupport the sales position of the suppliersPromote the potential for financial institutionsPromote the use in public procurement and regulationDevelop common Nordic standard contract paradigmsIndsæt præsentationens titel via sidehoved og sidefod

13Next Nordic steps It is recommended that…Nordic Council of Ministers will continue to focus on the area and support and promote the dissemination of green business modelsA Nordic High Level Policy Group will be establishedNICe (Nordic Innovation Centre) will play a central role in the implementation of new initiatives.Indsæt præsentationens titel via sidehoved og sidefod

14Thanks!The Green Paper on green business models in the Nordic region will be published the 25th of October 2010 onMarkus BjerreProject manager, FORA14Indsæt præsentationens titel via sidehoved og sidefod